The great air travel gamble

So Weiss has to take the biggest gamble of his life. He has to decide when to return to service the Airbus A330 jets he has parked; it takes weeks to reintroduce a fleet of aircraft and its pilots, crew and engineers. Then he has to work out where to fly them, and how often, and how many furloughed staff he needs to bring back to do so.

If he overestimates demand, he will be losing money by flying half-empty jets. If he underestimates, he will hand badly needed business to rivals and deepen already crippling losses. Virgin has raised an additional $1.6 billion (£1.2 billion) in private funding to stave off bankruptcy. “We’re gambling — will we meet demand? Is there a chance we’ll lose capital?” Weiss said.

The boss of every airline is playing the same game dubbed “summer route roulette”. They have no choice. Most carriers make 40 per cent of their profits in the third quarter of the year — and this year they need the money more than ever.

After cruising on cash reserves and the early rounds of bailout money from governments and investors, the finances of many carriers are about to nosedive. Globally, airlines are forecast to burn through $95 billion this year. British Airways has been losing £20 million a day.

“Many airlines are on a knife edge and summer 2021 is vital to their survival,” said Henry Harteveldt of Atmosphere Research, a travel industry specialist. Since March last year, almost 30 airlines have collapsed or filed for bankruptcy worldwide, including Flybe.

The trouble for high-flying chief executives is that ever-changing regulations due to Covid-19 vaccination and infection rates mean they do not know where they can fly passengers with no or limited testing or quarantine. “You might as well use the dartboard to do your strategic planning,” one airline chief (half) joked.

Britain’s airlines are exposed more than most since they have no significant domestic market to fall back on — unlike their American, Australian or Chinese counterparts. Domestic air travel in China is almost back to pre-lockdown levels.

All eyes are on the key US market. In 2019, about 22 million passengers flew between Britain and America, nearly 10 per cent of global air travel. It is unclear whether America will be among a handful of green-light destinations, likely to include Greece, Israel, Malta, Portugal and some Caribbean islands. Weiss insists it should be. “The US is going to surpass the UK very soon on vaccine rollout. By April 19, all adults will be provided with the opportunity for a vaccine, and 20 per cent of the population now has the full dose.”

Weiss’s arch rival, BA’s new boss Sean Doyle, agrees — and it’s not hard to see why. One of his routes alone, London to New York, generated $1 billion in sales in 2019. Doyle has more than 100 aircraft, many of which could service US markets, parked at airfields all over Europe and the Middle East.

Once they are back in the air, he knows he won’t have many high-spending business customers any time soon, so he will have to find ways to tempt premium leisure travellers. He has already increased flights to the Caribbean and added a service to Barbados from Heathrow.

Doyle will soon add “new destinations that we haven’t flown to before”, he said. He won’t reveal where but analysts suggest Phuket, Vietnam and Cambodia, and new cities in European countries that make it onto the government’s green list.

Rivals are not making Doyle or Weiss’s job any easier. American budget carrier JetBlue will begin cut-price transatlantic services this autumn with a service that it promises will feel anything but budget. Legroom in economy will be among the most generous in the sky and passengers will be able to customise meals. “Mint” business class will give BA and Virgin a run for their pillow menus.

Deep-pocketed Qatar Airways never stopped flying during the various lockdowns around the world, serving up to 100 destinations. It’s a deliberate strategy — an air grab — to tempt first-time flyers who have no other choice. Qatar Airways hopes travellers will enjoy the experience so much that they dump legacy carriers, such as BA, when they fly again.

Doyle and Weiss will soon face additional pressure from another Gulf carrier, Emirates. Its British boss, Sir Tim Clark, is lobbying hard to be able to resume the usual 20 flights a day from eight UK airports to Dubai International, from which passengers can connect to destinations from Australia to Zambia.

Airlines must decide when to revive parked fleets

NATIONAL POLICE AIR SERVICE

Flights between Britain and the United Arab Emirates were suspended after a rush of arrivals in Dubai over Christmas helped to cause a Covid-19 spike. Since then, the UAE’s vaccine rollout has been second only to Israel’s. Emirates and the other Gulf carriers, as well as BA and Virgin, are experimenting with digital vaccine passports to make it easy for travellers to demonstrate whether they have been vaccinated and show Covid test results.

Summer route gambling is less risky for short-haul carriers, such as easyJet and Ryanair, since they operate a low-cost, no-frills model and make money from leisure, not business travellers. With no well-staffed lounges, fast-track departures, fancy catering, snazzy business and first-class cabins, or big call centres, they lose less money than the big airlines when borders close. Since they only operate small jets, they can also ramp up again quicker than Virgin or BA. It can take a month to get an Airbus A380 superjumbo back in the skies.

Michael O’Leary, Ryanair’s pugnacious chief executive, says he will fly 60 to 70 per cent of his 2019 schedule this summer. Johan Lundgren, his opposite number at easyJet, is also bullish. “We know from previous downturns that short-haul leisure will return first,” he said. But he fears that the cost of PCR Covid tests — well over £100 — will deter travellers.

Airports are having to make big bets on the future, too. Virgin Atlantic and Norwegian’s long-haul jets no longer fly from Gatwick. The airport’s chief executive, Stewart Wingate, is looking to short-haul airlines, notably easyJet and Wizz Air, to take up the slack.

Last year, Heathrow lost its crown as the busiest European aviation hub to Paris Charles de Gaulle, handling just 22.6 million passengers, down from 81 million in 2019. John Holland-Kaye, its boss, is taking advantage of the lull by investing in new technology to attract more passengers when travel does resume. New X-rays can scan hand luggage without the need to remove liquids and electrical equipment.

Paul Griffiths, who used to run Gatwick but now oversees Dubai International, is going further with a “smart tunnel” that verifies departing passengers’ identities by scanning their irises as they walk through it. “You won’t have to show your passport at immigration,” he said.

All the long-term uncertainty has created one big short-term winner: the consumer. Airlines are so desperate that they are offering some of the best-value fares ever. Fancy a business-class return on BA to New York in October? It’s yours for £1,392 (one-third of the usual price). Prefer sunny LA? It’s only £200 more. At least some people will profit from summer route roulette.

Crawley catches a cold

Crawley depends on aviation, with an estimated one in five jobs reliant on nearby Gatwick airport before the pandemic. Locals joke that when airlines sneeze, Crawley catches a cold.

Surinder Arora is not laughing. He runs the Arora Hotel Gatwick Crawley and the airport’s Hilton and Sofitel hotels, three of the ten airport hotels he operates in the UK: “We’ve lost 94 per cent of our revenue and have had to lay off and furlough staff. It has been a painful experience,” he said. But he’s not giving up. While the Gatwick Hilton and Sofitel temporarily closed last year, he invested £44 million refurbishing them in anticipation of a pick-up.

“In a crisis you either pull the duvet over your head and forget about the world, or get out and fight. In the long term, there’s no reason why air travel and Gatwick won’t come back. When it does, we’ll be ready.”